The
state may have a loophole in its quest to wriggle out from a contract for the
privately owned juvenile prison at Tallulah, according to a new report by a
bond attorney.

The contract is derided
by critics for costing the state millions of dollars in management fees and
dividends that are paid to the prison's politically connected owners.

That loophole may lie
in the legality of the cooperative endeavor agreement between the state, the
city of Tallulah and the prison's owners, said Washington, D.C.-based bond
attorney Richard Marks of Piper Rudnick.

Marks, who is working
pro bono for the Juvenile Justice Commission, wrote to commission Chairman
Mitch Landrieu on April 18.

Two years ago, the Legislature
tried to end its obligation under that agreement by cutting off funds to house
juvenile offenders at the prison. That attempt stalled when Standard & Poor's,
a bond rating agency, threatened to lower the state's credit rating, a move
that could cost the state millions of dollars in higher interest fees on all
its outstanding debt.

Standard & Poor's, however,
may back down on that threat if a court finds the cooperative endeavor agreement
illegal, Marks said.

Marks said the state
cannot bring the matter to court, but attorney David Utter said a private
resident or organization could do so.

"We're going to look
hard at whether a lawsuit is in order," Utter, executive director of the nonprofit
Juvenile Justice Project of Louisiana, said Wednesday.

Utter, a longtime critic
of state Corrections Secretary Richard Stalder, lays the blame for the situation
at Stalder's desk.

Marks' seven-page letter,
Utter said, "confirms what we all knew: Secretary Stalder got the state into
a very bad deal, benefiting (former Gov.) Edwin Edwards' cronies more than
the children and our communities, and then made it worse by amending the contract
a number of times."

Stalder was not available
Wednesday for comment. Melissa Callahan, a corrections department spokeswoman,
said neither she nor Stalder have seen Marks' letter.

The prison's principal
owners are George Fischer, Verdi Adam and James R. Brown.

Fischer served as chief
of staff, campaign manager and transportation secretary for Edwards and as
health secretary during the administration of former Gov. Dave Treen.

Adam is a former highway
engineer who has other business investments with Fischer.

Brown is the son of the
late state Sen. Charles Brown of Tallulah.

Senate Finance Committee
Chairman Sen. Jay Dardenne, R-Baton Rouge, and House Appropriations Committee
Chairman Jerry Luke LeBlanc, D-Lafayette, both said Wednesday they haven't
seen Marks' letter. "We're paying a ransom because of a bad deal that the
state entered," LeBlanc said.

"We're obviously going
to have to deal with it during the budget process" of this legislative session,
Dardenne said.

Marks, in his letter,
said the cooperative endeavor agreement may be invalid because:

· The state will not
own the prison at the end of the 25-year agreement, thus the cost to the state
"may not be proportionate to the public benefits" of the lease;

· The dividends and salaries,
more than $8.7 million from 1996 to 2001, given to the owners are excessive
considering the owners' lack of equity risk in the project; and,

· The state could build
another prison for less than $29.8 million remaining on the debt.

Marks said the state
also should fully explore whether the cost of stopping the annual lease appropriations
might outweigh the costs of a bond-rating reduction.

Marks also advised the
state to proceed slowly on purchase negotiations because the state may end
up paying twice for the prison: once to the institutions that financed the
debt and once again to the prison owners, who put up the prison as collateral.

A less expensive "cure,"
Marks said, would be to allow Ambac Assurance Corp., the debt insurer, to
dip into funds placed in a reserve to offset the amount of the 1988 private
debt.